The ISM2014 Conference hits the Las Vegas strip, putting practitioners in the spotlight
Supply management practitioners themselves took centre stage during the International ISM2014 Conference in Las Vegas, from May 5 to 7. “The Focus Is You” was the theme for the event, bringing together more than 2,500 sourcing and supply management professionals from the US, Canada and other countries.
The three-day event featured nine mega-sessions and 10 learning tracks that comprised more than 50 education sessions overall. Those sessions hit a wide range of topics, including: talent development; supply management and finance; risk management; global sourcing and travel procurement, among many others. What follows is an overview of several of the conference’s education sessions.
Among the major themes at the conference was the growing relationship between the financial and supply chain functions within organizations. How do supply chain practitioners communicate the value of their organizations to those in finance and the C-suite? During a presentation entitled Boardroom Financials: Translating the Supply Chain Results Upstream, Craig Reed, managing director of MCD, LLC, encouraged the audience to put supply chain’s contribution to an organization into three categories: revenue; direct cost; and operating expenses. But supply chain functions can be put into more than one category, depending on the circumstances, he said.
“It’s ultimately important for you to understand your business, first and foremost,” he said.
Two themes arise when speaking with finance, Reed noted: value creation and value protection, and procurement must be able to show value to the CFO or other members of the C-suite. But that’s not always straightforward, cautioned his fellow presenter James Ezell, VP & CFO, Performance Foodservice-VA.
“Value is like beauty—it’s in the eye of the beholder,” he said.
Finance can sometimes undervalue cost avoidance, Ezell noted, since the concept can be difficult to put a dollar value on. He’s measured by earnings growth when he meets with senior management and cost avoidance doesn’t fit into that. Proving the amount the company saved through cost avoidance can help show finance the value of the process, he said.
To communicate effectively with finance, it’s important to understand boardroom language, said Reed and Ezell. They shared a list of commonly used financial terms like shareholder value, earnings per share and cash flow position. Supply management professionals must be businesspeople first and foremost, Ezell said, and must be able to show their value as best they can using financial language.
Reed noted that supply chain can articulate its value in several ways. Cost savings is often what supply chain does and how it gets measured, he said, and it can appear in various places. And when it comes to cost avoidance, it’s good if supply chain can get the credit for mitigating supplier requests for raised prices and market turbulence.
“The finance organization also needs to be educated,” he said. “So being able to articulate that value and educate your finance folks will help drive more synergy, will help get more traction and support from that organization.”
Search for Excellence
Most companies must work towards excellence when it comes to stakeholder relations—and Google is no exception. During their presentation, entitled The Search for Excellence in Procurement Stakeholder Relationship Mangement, Dr. Bernd Huber, Google’s manager, Sourcing Center of Excellence, Google Germany, and David Natoff, manager of the company’s procure-to-pay process, spoke about how Google transformed itself from an RFP shop—doing a high volume of competitive bids—to a business partner and advisor focusing on the customer. Natoff described what makes Google’s procurement process unique, including its extremely non-mandated, high-speed environment. With so much work and limited sourcing staff, prioritization is important.
Google has seen “phenomenal growth,” he said, with revenue going from $3 billion in 2006 to $20 billion over the last few years. “A lot of the challenge is about what do we work on, when do we work on it and how do we work on it,” he said.
The sourcing team is embedded within finance, Huber said, with 35 team members dispersed across 11 offices.
“Since we don’t have a mandate we have to actively sell our services to our stakeholders,” he said.
Those stakeholders can source without procurement’s help, so to offer value the procurement team must do it better. The good news, Huber said, is that life gets easier when stakeholders see that value and want to work with procurement.
To get to the point where that was the case, procurement did an analysis investigating their strengths and weaknesses, as well as opportunities and threats. While the team was strong due to its single, global integrated team and process, weaknesses included lack of investment in category knowledge and RFP fatigue, Huber said. While opportunities included untapped team member potential and key stakeholders asking for a larger role, threats included too much focus on price reductions and the need for focus on relationship management.
The analysis provided key takeaways, Natoff noted, including a focus on stakeholders who have an impact on business, he said, not necessarily the biggest spenders or those with the largest rate reductions. He recommended taking an inventory of services that the procurement team provides. A team can’t be good at everything, he said, so focus on the services that stakeholders want.
Google began stakeholder surveys about two-and-a-half years ago, Huber noted. Those surveys include two questions: what’s the satisfaction level and how can sourcing improve its performance? As well, the department hosts virtual “hangout parties” where stakeholders can discuss sourcing and offer feedback online. “It’s very interactive and opens up a lot of transparency as well, which is good,” Huber said.
Procurement conducts business relationship management interviews with their platinum and gold stakholders. The department does attribute mapping in which those stakeholders are asked what services they want and how sourcing is delivering.
Among the advice the pair gave was to measure progress. Data is king, Natoff said. As well, incorporate risk into the prioritization process. Develop joint business plans with stakeholders, he advised, and fund the important tasks and stop doing the rest.
Developing skill sets
Gaining experience across several supply chain functions is important, but doing so can be tough. A panel focused on skills needed to transition back and forth from logistics, operations, procurement and other supply chain areas.
Some companies want employees to focus on one area for several years before moving to another, said panelist Gary Stoddard, partner at procurement services firm Nitor Partners. While procurement and supply chain are broad the separate areas can sometimes lack integration.
Practitioners tend to work to become experts in one functional area without developing knowledge of other areas, Stoddard said—but more practitioners workign across areas helps drive an integrated and wholistic procurement environment. He identified eight categories that practitioners can work to develop skills in: spend analytics; category management; strategic sourcing; transactions; contract management; supplier management; supply chain; and logistics.
“There are some common skills across those eight areas,” he said. For example, influencing people is a good skill across all categories, Stoddard noted, adding that those who can’t influence others have difficulty enabling change, especially in large companies. Since some of the eight functional areas are more related than others, he advised looking for natural leaps first to aid role transition.
Stoddard noted sales and customer-facing experience helps practitioners, since skills like negotiations, project management and stakeholder management transfer well while offering experience across the business spectrum.
Fellow panelist Anthony Humphrey, former director of talent acquisition at MeadWestvaco, also recommended understanding other supply chain areas in order to make good decisions. And end-to-end understanding of the business process is useful, Humphrey said, since more supply chain organizations are now asked to show value rather than just procure goods. The shift from value protection to also include value creation means practitioners must understand functional areas across an organization.
Humphrey recommended seeking assignments that allow practitioners to explore other areas, including non-work related activities. As well, good mentors can help in building a skill set that can be taken into other areas or occupations.
Panelist Andrew Bartolini noted a transformation in which more organizations have a CPO than before. He noted a study by research firm Ardent Partners stating that during the recession of 2008-2009, many organizations began looking to procurement to defend the bottom line. The study noted that 18 percent of respondents considered procurement a “top collaborator,” while another 25 percent said it was a “significant influencer.” As well, 58 percent of CPOs think their staff is too small, while 55 percent said that skills need improvement.
Many CPOs have a technical background rather than, for example, an MBA degree, Bartolini said. Their background is often process-oriented. The trend among recruiters, Bartolini noted, was searching for CPOs from the outside who have worked for companies of similar size. Bartolini noted that Tim Cook, Apple’s current CEO, was CPO of the company previous to his current position.
Cyber risk management
Cyber security risk management will become one of the big business topics in the next five years, predicted Timothy Hall, president of AZORCA Cyber Security. During his presentation, Hall noted that most people think of such risks as an IT problem rather than supply chain issue, supply chain is often the main target: 40 percent of cyber attacks are associated with, or go through, the supply chain, Hall said.
Although many people will associate cyber risks with stealing, there are several threats organizations must deal with. For example, corporate espionage can involve those looking for intellectual property, while nation states may look to a company’s system to gather intelligence. So-called hacktivists—using computers or computer networks to promote political ends—will also operate differently from others who pose a cyber risk. Finally, Hall said, insiders can pose a threat to an organization’s IT security.
“And there’s no better place to go than the supply chain,” he said.
To add to the situation, cyber risk is messy, Hall noted. It covers a lot of areas and it’s hard to know whether to be concerned about it. The issue is further complicated by current business realities, he said. For example, while organizations may say that they will “protect, detect and respond,” to cyber risk, that’s made difficult by the fact that organizations possess existing infrastructure. Most companies simply can’t buy all new IT equipment. The question is, Hall said, what can companies do immediately to protect themselves?
Current technology and business trends put the advantage firmly in the hands of the adversary, Hall said. While organizations must protect everything from cyber risk, those looking to perpetrate crime need only break into one thing. An organization can be vulnerable to a zero-day attack—a cyber attack that exploits a previously unknown vulnerability in a computer application. As well, management can lack a common perspective and understanding of the risks in the cyber world. Bring-your-own-device policies can also present vulnerabilities, Hall said.
So how can you make the situation better? Some short-term steps include establishing both a common ground and understanding of the risks among the C-suite, Hall said. Let those in the organization know that it’s a senior management problem. He also recommended evaluating an organization’s current state to understand where the company is in terms of cyber risk management.
To conclude, Hall told the audience that dealing with cyber risk involved deciding how much risk an organization is willing to tolerate. And while it’s a difficult process, it’s important for organizations to identify what they’re trying to protect.
Supply chain auditability
Supply management has a large impact on competitive advantage, according to Rene Rendon, associate professor at the U.S. Naval Postgraduate School. During a session entitled The Case of Auditability in Supply Management Organizations, Rendon made the case for auditability in supply management. Those supply chains are becoming more complex and expanding their reach globally and with that comes risk, he told the audience. At the same time, organizations are relying more on supply management for competitive advantage and focusing on supply chain performance and accountability.
Auditability, Rendon said, reflects how well an organization follows the decision trail during the process. And the auditability of a supply chain is reflected in three functions, or an auditability triangle: competent people; capable processes; and effective internal controls.
In speaking about competent people, Rendon asked the audience to consider whether the people within an organization had the skills and knowledge to perform their tasks. One of the biggest recent shifts in supply management is that practitioners now work more often in cross-functional teams. Supply management, he said, is broader than the purchasing function and those in supply management may end up working with engineering, finance or other organizations.
For the second point—capable processes—Rendon noted that supply management was a broad area that included not just purchasing, but also distribution, logistics, manufacturing, materials management and other areas. In these areas, look at whether processes are institutionalized and whether there is continual improvement, he advised.
Fellow presenter Juanita Rendon, lecturer of accounting, U.S. Naval Postgraduate School, told the audience that internal controls should be an ongoing process rather than a one-time action. For risk assessment, organizations should think about not only what could go wrong, but also what the objectives are regarding areas such as financial, compliance and operations.
Overall, the ISM2014 Conference offered a range of topics covering several aspects of supply management. Delegates left with both ideas and best practices to put into action when they returned to their organizations.